Where America's white-collar jobs go: It's not just India

February 26, 2004

By Abraham McLaughlinStaff writer of The Christian Science Monitor

JOHANNESBURG, SOUTH AFRICA

India may still be the world outsourcing king, the great global magnet that's attracting American and European service-industry work such as computer programming, insurance-claims processing, and call-center staffing.

But a growing host of countries aims to knock India off its throne.

From South Africa to Russia to Hungary to China, ambitious nations and companies are rushing to build call-center capacity and back-office processing units to claim their share of America's rich outsourcing pie.

So, even as US presidential candidates and labor unions bemoan the loss of jobs, there's growing global ability to attract American work. That means it may get even easier and cheaper for US firms to ship jobs overseas.

"This Kerry thing bothers us not one tiny jolt," says South African IT manager Ian McLuckie, referring to Sen. John Kerry, who has been sparring with Democratic presidential rival Sen. John Edwards - and President Bush - over how to respond. "Americans can fight this trend with customs fees or export duties or whatever," Mr. McLuckie adds, "but after a while, economics will prevail" - and jobs will continue to emigrate to cheaper places.

McLuckie leads a technology team at the headquarters of EDS Africa, a division of the Texas-based global outsourcing firm EDS. The Africa branch's modern building sits amid a sprawling office park with sleek buildings, manicured lawns, and bubbling fountains outside Johannesburg. Inside, charged-up programmers are, among other projects, building human-resources and payroll software for a big firm in Ohio, a state where the job-export debate rages.

In 2003, US firms struck $119 billion worth of million-dollar-plus outsourcing deals - up 44 percent from 2002, according to Gartner, a research firm based in Stamford, Conn. In 2004, Gartner projects there will be 30 percent more US firms doing outsourcing than last year.

India's rising challengers

South Africa is in the top echelon of India's IT competitors, according to Gartner. The group also includes Canada, China, Hungary, the Philippines, Poland, Russia, and others. A second tier includes Belarus, Costa Rica, Egypt, Estonia, and Venezuela. Promising rookies include Ghana, Mauritius, Morocco, Nepal, Senegal, and Vietnam.

"We're in a global market," says Richard Matlas, a Gartner research director. "Even though some politicians are trying to jump on the bandwagon of keeping jobs in the US, corporations have to look at global delivery of their services to stay competitive."

But it's still a controversial trend. Senators Kerry and Edwards propose various solutions, including corporate tax incentives to keep jobs in the US. A bill introduced this week by Sen. Christopher Dodd (D) of Connecticut would prevent federal agencies from awarding contracts to firms that employ overseas workers. At least 10 US states are considering similar legislation.

Critics of outsourcing argue foreign workers are exploited with low pay, or that overseas work conditions are sub-par or even dangerous. The firestorm has spurred some companies to try to hide the fact that their operations are overseas. Some ask their call-center agents to dissemble - to give the firm's home-base city if callers ask where the agent is located.

Meanwhile, McLuckie's team is charging ahead. They recently became the first in Africa to achieve CMMI Level 2, a technical benchmark that enables them to better compete for IT jobs worldwide. Currently just 5 percent of their business is overseas outsource work. In two years, it will be 50 percent, says McLuckie.

The group employs 450 people, with 100 to 150 more hires projected for next year. Rookie programmers at EDS Africa make roughly $18,400 a year - and must pay all benefits, including health insurance, themselves. A comparable US worker might get $50,000, not including benefits. But given South Africa's 40 percent unemployment, these jobs are bonanzas.

South African officials see the trend as a desperately needed economic boon. They envision up to 100,000 new call-center jobs by 2007.

Squabble for contracts

To achieve that goal, however, they'll have to compete with India. "India is public enemy No. 1," says McLuckie. The South Asian giant has roughly 70 to 80 percent of outsource jobs, says Mr. Matlus, "but as their wages start to go up, you'll see shifts to other countries." China, for instance, can draw on massive manpower.

Like outsource seekers worldwide, South Africans tout their country's strengths:

• Cultural ties with US and Europe, including the South African accent, which often sounds vaguely British to American ears.

• A shared time zone with Europe, eliminating the need for more expensive all-night call centers that are common in India.

• A strong reservoir of business skills from its mature insurance and banking sectors.

• Falling phone rates due to a big new fiber-optic cable running up Africa's coast and connecting the continent with Europe. "We can get a call to New York for less than somebody in Chicago can," says Marc Spendlove, marketing director for Dialogue Group, which has a 350-person call center in Cape Town.

'Tickled' workers

His workers handle, for instance, off-hours customer- service calls for European insurance firms. Or when romance-seekers enter personal details on the US online-dating website tickle.com, the data are shipped here and checked to ensure they're "not too raunchy," says Mr. Spendlove.

Starting salaries are in the $750-per-month range. After 10 months, Ricardo Dyson, a Dialogue Group call-center manager, has doubled his salary. With his big job, he's become "the man of the house," enabling his family - his mother and two sisters - to seek a new, bigger home. "I'll even get my own room," Mr. Dyson says. "That's seriously nice."